Good News for Seagate, But Proceed with Caution
Company flirting with new highs but stock can't climb forever.
I went home last night and put my kids in bed and fell asleep around 8:45 p.m. I didn't move an inch or wake up till 5 a.m. I haven't slept or felt this good in forever -- I'm ready to run a marathon.
The Hang Seng closed lower to the tune of 0.49%. The Nikkei was still closed on holiday. However, European stocks were in positive territory earlier this morning. And here in the US, we're currently trading higher.
Here's what I'm focused on this morning:
Some good news out for the hard-disk company. After the close last night, it offered up its first-quarter outlook.
Per the release:
"For its first fiscal quarter, Seagate now expects revenue to be at or slightly above the high end of its original guidance of $2.4-$2.6 billion. In the event OEM demand is stronger than we anticipate during the last two weeks of the quarter, as occurred last quarter, revenue for the first fiscal quarter could be greater than our revised guidance. As a result of our rapid transition to market leading notebook and desktop products, as well as improving factory efficiencies and utilization, gross margin as a percent of revenue is now expected to be approximately 23-24%."
So, is the stock worth storing?
1. There could be a solid trade here today. Note that the Street was at $2.54 billion and also that the flirtation with new highs could draw some eyes.
2. It's a good value at just over 11 times this year's estimate and the stock could go places. It would be more fairly valued right now just north of $20.
3. That said, the stock, like so many others, has been on such a rip-roaring tear this year that it makes sense to proceed with caution. Only the nasty weeds in my wife's vegetable garden seem to grow straight to the stars.
American International Group (AIG):
The chatter yesterday was that the newly resurrected insurance company may offer up some shares.
My two cents:
1. It would probably be a good time to do so. After all, the stock has taken off, rising to the mid-$40s from the single-digits earlier in the year.
2. But no way do I want to dip my toe in the water. I refuse to pile on what could be a bubble. I'd rather wait for the recent frenzy to subside and things to level out a bit. At that point I'll reconsider the situation.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter